:max_bytes(150000):strip_icc()/GettyImages-2236612602-5adfb4758f2749909207a515743423f7.jpg "Some Americans Aren’t Looking to Save on Household Goods—They’re ‘Trading Up’")
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Key Takeaways
- Procter & Gamble and Colgate-Palmolive leaders said consumers are buying more high-end household staples, while sales of bargain brands cool.
- Both companies plan to navigate this environment by leaning into product innovations—upgrades that tend to accompany price increases.
Some companies are struggling to sell basic household goods—but consumers are snatching up high-end toothpaste and hair-care products.
Procter & Gamble (PG) is rolling out “innovations,” or upgrades, across its entire portfolio–from budget brands to high-end alternatives, and increasing prices as the company navigates tariffs and rising costs, CFO Andre Schulten said on a conference call last month. So far, the strategy is working—at least for the higher-end market, according to the maker of Pampers diapers, Tide detergent and Charmin toilet paper.
“In some channels, we see the majority of growth in our categories in the premium end, not in the value end of the lineup,” Schulten said, according to a transcript made available from AlphaSense.
Colgate-Palmolive (CL) CEO Noel Wallace gave a similar assessment of the domestic market for household staples on a conference call last week. The company behind Colgate toothpaste, Speed Stick deodorant and Ajax cleaners is also adopting an innovation-heavy strategy.
“We still see the premium and the super-premium [segments] growing very, very nicely,” in the industry, Wallace said, according to a transcript. “It’s the value-oriented brands, or SKUs, or segment, as well as the mid-price segment, that seems to be suffering.”
What This News Means for Investors
High-end household goods are outperforming bargain brands, and this may be an indication that consumers are trading up, Procter & Gamble CFO Andre Schulten said. Budget items may also be struggling because low and middle-income households are stretching their current supply and buying store brands.
Anemic job growth and concerns about inflation are weighing on consumers, particularly low- and middle-income households. That isn’t translating into a focus on “affordability,” Schulten said, but on “value.”
“We continue to see consumers trade up,” he said.
Sales of bargain brands remained sluggish, despite companies competing for customers by rolling back prices, ramping up promotions and issuing coupons, the companies said.
“We’ve seen some volume slowdown in the categories in which we compete,” Wallace said. “All of the retailers and all the competitors are looking for solutions.”
The contrast in demand for bargain and premium items has become a common theme for consumer companies. The frothy stock market and appreciation in home values has helped wealthier Americans feel comfortable paying up for things like international flights and saving on some items to splurge elsewhere.
Overall, the volume of Procter & Gamble products sold in North America last quarter held steady compared to a year earlier, Schulten said. Total sales in North America ticked up 1% year-over-year because of price increases, he said. Colgate-Palmolive reported a 0.5% year-over-year dip in North American sales by volume last quarter. Total sales in the region decreased slightly less due to price increases, according to a press release.
